Media firm Rappler scorns Constitution by getting foreign money

  • Reading time:7 mins read

The Philippine Constitution’s Article XVI, Section 11 is categorical: “The ownership of mass media shall be limited to citizens of the Philippines.” Indeed, even in an era of free-flowing capital, most countries in the world have maintained their restrictions on foreign capital in their media. For good reason, since only its citizens must have primary control of the means of forming public opinion.

Yet the web-only news outfit — which had been one of former President Aquino’s supporters in media and now President Duterte’s fierce critic — has boasted that two American companies, Omidyar Network, Inc. and North Base Media, last year made substantial investments in it.

Foreign funds in a media outfit: Rappler’s announcement Nov. 05, 2015

“We are excited to be investing in Rappler,” the news website in its post on November 5 last year quoted an Omidyar Network official as saying in an article entitled “Omidyar Network invests in Rappler.” Earlier, in May, it reported that another US firm, the “investment company North Base Media (NBM) has invested in Rappler.”

Omidyar is funded by the French-American Pierre Omidyar, who had set up what is now one of the biggest online retailers, eBay, while North Base Media is an investment firm, which its website says is “focused on media, journalistic and digital-driven opportunities in growth markets.”

Omidyar and North Base Media claim their investments in Rappler are not motivated by pecuniary goals. Omidyar is a philanthropic enterprise while NBM, its managing partner Marcus Brauchli informed me through email, is in Rappler only so it can get its “advice on digital trends and media in Asia.” Yeah, right.

The biggest Filipino shareholder of Rappler, on the other hand, claimed — without providing me with documents to prove so — that the foreign money will be used only for “operations overseas.”

Why have Rappler and the two US companies refused to disclose the amount of their not-for-profit investments in Rappler?

If the foreign money is for some noble purpose, for example that it would strengthen media in the Philippines and contribute to its democratization, then why can’t they say how much these are? Why are they supporting a move that scorns our Constitution?

P100 million?

The two US outfits’ investments in enterprises elsewhere are at least $1 million each. If they each invested such amount, then Rappler would have received $2 million. That would be P100 million, or twice the P50 million Rappler has spent in the past four years. No wonder Rappler has been able to invest huge amounts of money on technology and web-tricks to draw traffic into its website, and to draw in hundreds of thousands of viewers.

If they can do this, then any foreign company — even those from China (People’s Daily?) and Russia (Russia Today?) — can do so too and set up a website that would be totally different from Rappler’s indisputably pro-American stance. If an eBay-related firm (Omidyar) is allowed to invest in Rappler, then the Chinese (the biggest online retailer on the planet) could enter the country’s media industry — so what kind of media will we be getting?

For an enterprise engaged in media — an industry sworn to noble principles of transparency and nation-building rather than profits — Rappler adopted dubious legalistic means to skirt the Constitutional provisions.

NBN founder Brauchili in his email to me inadvertently hinted at this, claiming that Rappler “has established a structure that has allowed it to access (foreign) capital, in a manner compliant with Philippine law,” and NBM participates in that. Was he told that this “structure” is a flimsy one, which could be easily torn down when a case is brought against it in court?

Rappler practically boasted how this “structure” allowed it to skirt the constitutional ban on foreign capital in media in its article that reported NBM’s investment in May: “Rappler is the first and only media startup in the Philippines (that uses) Philippine Depositary Receipts or PDRs to (get foreign investments).”

PDRs patently defy the Constitution’s limits on foreign investments in certain industries that only three powerful firms with obvious political connections have dared use it. Its machination is to pretend that a foreign firm doesn’t really technically own a share in a company in which foreign capital is restricted or banned, but only gets whatever income the “underlying” share generates.

For decades, the Securities and Exchange Commission allowed this artifice to be used in the form of PLDT’s “American Depositary Receipts” (listed in the New York Stock Exchange) to prevent a disruption of American-owned shares in PLDT, when the treaty allowing US investments in public utilities, the Laurel-Langley Agreement, expired in 1974.

It was the Indonesian magnate Anthoni Salim though who used PDRs in a massive way to skirt the Constitutional ban on foreign capital on media firms.

In 2014, ePLDT, a subsidiary of PLDT — which is in violation of the Constitution since it is owned 76 percent by foreigners, way beyond the Charter’s 40 percent limit— put in P2.5 billion its subsidiary Hastings Holdings, masked as PDRs.

P4B for Belmonte

The money was used to raise the reportedly P4 billion it paid for the controlling 51 percent equity of Philippine Star, held by the family of Feliciano Belmonte. The Speaker of the House of Representatives at that time, Belmonte was intensely campaigning to remove from the Constitution its restrictions on foreign capital in certain industries, where Salim was based in.*

Cignal TV in 2013 was also massively funded through a P10 billion investment from ePLDT, disguised as PDRs. No wonder Cignal TV in a few years’ time, zoomed to become the country’s biggest satellite-to-home TV network.*

Since the Aquino government through its Securities and Exchange Commission looked the other way from Salim’s violation of our Constitution, Rappler apparently followed suit.

Especially with the worldwide web becoming more and more the Filipinos’ source of information, it is high time for Congress to find out why Rappler — and according to its article, ABS-CBN and GMA7 — has been allowed to skirt the Constitutional ban on foreign capital in media, and to plug the legal loopholes allowing them to do so.
The dire implications for allowing foreign capital to control media are just mind-boggling: A country’s media is the embodiment of its nationhood.

Why would Rappler get foreign money that skirts Constitutional limits, which would dent its credibility, and would even make it vulnerable to suits by a government that’s not supportive of it?

While one of its owners had boasted that Rappler has been so successful that it has set up an Indonesian subsidiary, has it spent too much on technology and other web tricks to expand its traffic — without the commensurate income — so that it is now financially bleeding? Indeed, the idea just five years ago of websites raking in advertising money has proven to be a huge fallacy. Ever wonder what Rappler’s “mood” charts are for? A source alleged that Rappler has been selling this “big-data,” the links between news stories and reported moves, to US firms.

Whatever the reason that Rappler has sought overseas money, what kind of country have we become that we no longer are outraged at foreigners’ trampling on our Constitution?

On Monday: Who owns Rappler?

*For details see Chapter 8 (Salim’s Media Empire: Ultimate Transgression of PH Sovereignty) in my book, available in most Metro Manila National Book Store branches and Popular Bookstore. Online orders free delivery in Metro Manila:
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